Yesterday's trading: Sainsbury on menu

Professional punters were put on J Sainsbury alert for the first time in weeks. Advice to fill their trolleys with stock came over lunch as shares of the third-biggest UK supermarket began to tick higher in busy trading.

They retrieved a small deficit to close 3¼p higher at 424½p on meaty turnover of 30m. But the big question being asked was why buy now?

Dealers in the stock were expecting a quiet period to follow last week's Christmas trading statement which showed underlying sales up a satisfactory 5% over the festive period. But now they are hopeful that something exciting could be on the menu.

Could it be that the long-awaited, mouthwatering takeover is about to happen? Speculation has been rife over the years and the last flurry of excitement was caused in November by Lord David Sainsbury's surprise resignation as Labour's Science Minister.

Whilst in office, his, or the family's 16% stake, was locked up in a blind trust to avoid any conflict of interest, providing a huge stumbling block for any potential bidders.

Lord Sainsbury said he would not sell a share for at least three months after leaving government. Revived gossip doing the rounds yesterday again suggested he has already lined up a buyer for his stock when it is unlocked from its blind trust in February.

Archie Norman, the former Tory MP and one-time boss of Asda, has been tipped as a likely buyer. He runs Aurigo Management Partners, a venture capital fund, with former Energis colleague Bradley Palmer.

It is backed by four major institutional shareholders and would definitely have the financial backing to mount a £8.7bn cash, or £5-plus a share cash bid for Sainsbury.

The Footsie fell 47.8 points to 6,215.7 on the prospect of another painful¼% rise in UK interest rates next month following news that inflation jumped to its highest level in more than 15 years in December. Sharp falls in heavyweight oil and mining stocks following weaker commodity prices also weighed on sentiment.

Wall Street did its best to help, retrieving a 17 point decline to trade 29 higher in the early stages, although weaker-than-expected manufacturing data kept many buyers on the sidelines.

Antofagasta lost 17p to 449p and Xstrata 63p to 2265p in sympathy with the 10% fall in the copper price since January 2, and more than 30% against its record high of $8,800 a tonne set last May. It traded at $5,710 tonnes yesterday.

A Merrill Lynch downgrade to neutral from buy left sugar group Tate & Lyle 26½p lower at 712½p. Credit Suisse also slashed its target price to 700p from 750p on evidence of slowing US growth.

Worries about higher mortgage rates prompted a 35p fall to 1408p in housebuilder Persimmon. Dearer money concerns and fears that Stuart Rose's halo will soon begin to slip left Marks & Spencer 12p down at 680p and more than 50p below the recent high.

Talk of a private equity bid north of £17 a share lit up Scottish & Southern Energy, 34p brighter at 1560p.

Further consideration of the £2.4bn sale of its aerospace business to GE of the US, Smiths Group advanced 18p more to £1112½p for a two-day leap of 127½p.

American buying of CSR on the perception the stock looks heavily oversold helped the micro chip developer rally 42p to 695½p.

Goldman Sachs sparked buying of industrial supplier SIG by raising its target price to 1179p from 972p. The close was 41p higher at 1112½p.

Placed on Aim at 150p, Mobile Credit Baltic closed at the day's best of 182½p for a healthy premium of 32½p. The company provides immediate, short-term credit to borrowers in the growing Eastern European markets.

Profit-taking following a trading statement left Burren Energy 41½p off at 748p. Seymour Pierce says buy. The statement confirms its most recent guidance on daily oil production. It has more than replaced its reserves in 2006. KBC Peel Hunt is also a fan and believes that Burren is one of the real value propositions among the UK mid-cap oils, with a net asset value of 920p a share.

• Edison Investment Research believes early stage biotech company Immupharma (1p off at 83p) could be worth five times its current £54m market capitalisation. Apart from its highly promising IPP-201101 treatment for Lupus, the chronic rheumatic disease, it has a broader R&D pipeline, with other drug candidates in late pre-clinical development for pain and infections, a chemical library and peptide converting technology.